The property market in 2016 has continued to build on the momentum seen towards the end of last year. Activity levels have remained broadly positive so far, with further reported rises in average prices. There are also encouraging signals of intent that property remains a key priority for many people.
The major national house price indices reported rising prices in January. On the one hand this is welcome news for existing property owners and demonstrates an enduring demand from buyers, but in reality masks the fact that supply levels remain at historically low levels and this is driving price movements. Halifax recorded a monthly increase of 1.7% in average prices, whilst Nationwide recorded a more modest 0.7% jump in values.
Knowing your numbers
The market remains extremely polarised, and the latest Land Registry sales transaction volume data published last month further underlines the variation in market dynamics at different price levels. For example, sales volumes on an annual basis were reported to have increased by 33% nationally for values between £500,001 and £600,000, yet sales volumes for homes worth over £2,000,000 fell by 21%.
According to Rightmove average sale values rose by 0.5% in January, which is the second highest increase for this time of year since 2007. However, at the top of the market sellers are taking note of weaker demand. Across Garrington’s operating areas we have seen a series of price reductions take place over the last month, as sellers start to accept the reality of greater price sensitivity at the top of the market due to a diminished and cautious number of buyers. In London the market is equally complex, with a 20.8% price movement spread between the best and worst performing boroughs according to Rightmove.
The above trends further underline the increasing importance for buyers and sellers alike to look beyond market generalisations and average values when considering their moving plans.
The housing market has never been very far from press headlines over the last month, as the government comes under increasing pressure to address what some critics are calling a ‘looming housing crisis’. In a bizarre twist of traditional political stances, the former chief speechwriter for the Prime Minister has publically criticised landlords for driving up asking prices, and endorsed the new proposed tax changes as fair. By contrast, the law firm of Cherie Blair QC, wife of the former Labour Prime Minister, has launched a legal battle against the Government’s proposed policy to increase taxes on second homes, claiming it breaches the human rights of landlords.
Politics aside, many landlords are still attempting to acquire further property ahead of the proposed 1st April implementation date for the higher stamp duty levy, albeit Garrington is now seeing an increasing number of investors using corporate structures as a purchasing vehicle. Whilst forthcoming tax changes will undoubtedly affect this part of the market, it is important to remember that buy-to-let transactions only represent 2 out of every 10 sales nationally.
Best places to buy
For those contemplating moving home or making an investment purchase, a question frequently being asked is ‘where should I buy?’ Whilst there is no easy and obvious answer to this question other than ‘it depends’, a key theme already seen by Garrington this year is the ‘search for good value’. With many parts of the UK having experienced substantial price growth over the last few years, we are seeing more buyers having to compromise on their requirements in the £500,000 – £1.5m price bracket in terms of size of accommodation or looking at alternative locations.
Two noticeable areas of the market that may offer good value this year are the prime market above £1.5m and the country market.
Property values in the prime market have fallen significantly in many locations and Garrington is seeing renewed confidence and interest this year at higher price levels, as revised stamp duty rates become an accepted norm, and buyers see that increased transaction costs are being offset by lower purchase prices.
The country market may benefit from an overspill of priced-out city purchasers this year. A lot of the price growth seen recently has been city based, mainly driven by inward investment and job creation. For example Cambridge, London, Bristol and Oxford have all seen average house prices increases of over 10% during the last 12 months alone. Despite sales volumes having dropped by 13% nationally over the last 10 years, transaction volumes in cities during the same period have increased by 25%, according to Land Registry data.
Whilst many buyers continue to compete for the same limited pool of property for sale in certain locations and price points, there are compelling and frequently overlooked opportunities for open minded and well informed buyers to explore this year.